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Friday, 14 April 2017

FTSE falters ahead of holiday, banks in focus

Britain's top share index declined on Thursday, with financials in the spotlight as U.S. banks were set to report earnings, though volumes were light ahead of a market holiday.

The blue-chip FTSE 100 .FTSE index was down 0.5 percent at 7,311.88 points by 0945 GMT, in line with a broader decline on European markets.

The FTSE 100 was on track to post a slight loss for the week.

Financials weighed on the FTSE 100, taking off nearly 12 points. Royal Bank of Scotland, HSBC, Standard Chartered and Barclays all fell by 1 percent to 1.6 percent, as investors anticipated earnings releases from their U.S. counterparts later in the day.

"Banks are on offer this morning, and we think that's ... because it's reporting season for the U.S. banks, so a bit of a choppy day in the banking sector globally," John Moore, trader at Berkeley Capital, said. "We're seeing a bit of risk-off ahead of the bank holiday weekend."

Energy stocks were the biggest drag on the index, taking off around 15 points. BP and Royal Dutch Shell both were down around 1.4 percent as the price of oil edged lower.

Stocks trading without rights to their latest dividend payout dragged, including Standard Life, which dropped 3.5 percent and was the biggest individual faller.

Primark-owner Associated British Foods jumped 3.4 percent to its highest level since the beginning of January after Jefferies raised its rating on the stock to a "buy", citing continued strength in sugar and a turn in Primark margins.

"The 19 April interims should confirm strong results ... thanks to fx translation boost and a sugar rebound. We also expect a more assured message on the Primark margin outlook," analysts at Jefferies said in a note.

Precious metals miners were also in demand, with Fresnillo and Randgold Resources both gaining more than 1.2 percent.

The underlying price of gold hit a five-month peak as investors sought safe-haven assets amid rising geopolitical tensions over U.S. relations with Russia and North Korea. A weaker U.S. dollar also helped.

British manufacturers reported the fastest export growth in more than two years in early 2017 and the services sector also recovered to rack up its strongest sales growth since last June's Brexit vote, a business survey showed on Thursday.

The British Chambers of Commerce, which runs Britain's largest quarterly private-sector business survey, said firms reported a robust short-run outlook.

But there was much more uncertainty about the medium term as well as fears of sharply rising costs.

Britain's economy bucked most economists' expectations that it would slow sharply immediately after the vote to leave the European Union. Exporters have been in a positive mood helped by a recovering global economy and a fall in the value of sterling.

However, growth is expected to weaken this year as consumers - the mainstay of last year's expansion - come under pressure from higher inflation after sterling's post-referendum tumble.

"Many firms tell us their short-term expectations are strong, but that the medium-term picture is far from clear," said Adam Marshall, the BCC's director-general.